Eurogroup confronts own deficit: governance

For the past seven-plus years, as Greeces debt crisis plays out in public in painful, blow-by-blow detail, the European body charged with its rescue has conducted its affairs away from prying eyes.

Now there are growing calls to change the way the Eurogroup operates.

Critics of the gathering of finance ministers from the 19 countries in the euro and officials from the European Central Bank and European Commission accuse it of acting like a private club. They want greater transparency in keeping with the influence it wields over issues of vital importance to many of the eurozones 350 million citizens.

“The euro crisis changed everything,” said Leo Hoffmann-Axthelm, an advocacy coordinator with the NGO Transparency International. “The Eurogroup should be institutionalized, with proper rules of procedure, document handling and a physical address with actual spokespeople. We can no longer be governed by an informal club.”

Although it can impose tough conditions for bailing out struggling member countries or rescuing banks, it publishes no official minutes, has no headquarters, and the people who function as its secretariat have other day jobs. Its public face is a eurozone finance minister, who works for no salary: The current president is Jeroen Dijsselbloem, a Dutch Socialist with conservative views on fiscal matters.

Legally, it is governed by a single sentence in Article 137 of the EU treaty which says “arrangements for meetings between ministers of those Member States whose currency is the euro are laid down by the Protocol on the Euro Group.”

Emily OReilly, the EUs ombudsman, is among those calling for reform. While she credits Dijsselbloem for his efforts to peel back the curtain on Eurogroup proceedings, she said: “It is obviously difficult for Europeans to understand that the Eurogroup, whose decisions can have a significant impact on their lives, [isnt] subject to the usual democratic checks and balances.”

If minutes of its meetings were made public, outsiders might not like what they saw.

Indeed, when a group of citizens from Cyprus who disagreed with the terms of the 2013 Cypriot bank bailout took their case to the European Court of Justice, the courts responsewas that the Eurogroup is not “capable of producing legal effects with respect to third parties” because it is just a discussion forum.

But some of those who participate in Eurogroup meetings argue that its informality is precisely what makes it useful. The last thing they want is another bureaucratic EU institution, and if the Eurogroup were reformed out of existence, they say, a new version would pop up in its place, without the minimal accountability it currently offers in the form of meeting agendas and press conferences.

“Its the informal nature of the Eurogroup that makes it possible to have an open exchange that you will not find in more formal bodies,” said Taneli Lahti, a former head of cabinet for European Commission Vice President Valdis Dombrovskis. “This is crucial for policymaking, negotiating, finding agreements and understanding each other.”

“Its irreplaceable in value,” said Lahti, who is now the director of the Confederation of Finnish Industries but in his previous role accompanied four Commission vice presidents to Eurogroup meetings between 2010 and 2015.

This week, the Eurogroup met behind closed doors to discuss the latest chapter in the Greek story, but neither the Greek public nor people in the other EU countries funding the €86 billion bailout program — the third of its kind — got to follow the debate, which failed to produce a final agreement on debt relief.

Speak up

If minutes of its meetings were made public, outsiders might not like what they saw.

According to one senior official who has attended many Eurogroup meetings, a handful of people do nearly all the talking on Greece — the groups president and the ministers “from Germany, France, the Netherlands and Greece, plus the Commission, sometimes Italy.” Some ministers cant get a word in edgeways because the proceedings take place in rapid-fire English.

“Germany clearly puts pressure on a lot of member states,” added the official.

In a telling episode from the height of the Grexit fears in the summer of 2015, 18 ministers sat waiting in the EUs Council of Ministers until Dijsselbloem walked in flanked by ECB President Mario Draghi and the International Monetary Funds Christine Lagarde. The trio sat down and Dijsselbloem informed his fellow finance ministers that a decision on a new round of the Greek bailout had already been reached.

Michael Noonan, the finance minister of Ireland which had exited its own Eurogroup-approved bailout in 2013, shook his head. According to sources who were in the room, he then did something most members of the body avoid: He spoke up.

“As a finance minister, Im asked to make a decision of the [three officials] and I have nothing to go by,” he said. “How can I pass judgment?”

“Often the real decisions are taken in preparatory meetings,” said Maria Joaõ Rodrigues, a Portuguese MEP who specializes in eurozone governance. According to her, ministers hide behind expert views, but “if there was more transparency around final debates, ministers would be confronted with their own [national] public opinions.”

Many of the decisions are pre-prepared by a body called the Euro-area Working Group (EWG), made up of the chief civil servant from each national treasury department. It works as a second operational board of the European Stability Mechanism (ESM) — the eurozones bailout fund. While it takes minutes, it doesnt publish them nor, as the EU ombudsman has noted, does it have any formal operating procedures.

No intellectual exchange

The Eurogroup met for the first time at Château de Senningen in Luxembourg on June 4, 1998, with the task of coordinating economic policy during the countdown to the launch of the euro. Twelve years later, with a financial crisis engulfing the eurozones weaker economies, it launched a series of sovereign and bank bailouts for Greece, Spain, Portugal, Ireland and Cyprus.

The crisis transformed it from a talking shop into the last line of defense for the euro and dozens of major European banks. Together with the ESM — which also exists apart from the EU treaty and standard operating procedures, and has the Eurogroup participants on its board — it doled out more than €250 billion in emergency loans. Without the intervention of the Eurogroup, the sovereign debt crisis could have ended in catastrophe.

Nobody is more scathing about the body than Yanis Varoufakis, who as Greek finance minister battled against Eurogroup-mandated reforms until he fell out with Prime Minister Alexis Tsipras.

Whatever happens next, the Eurogroups future is likely to depend on increasing the levels of trust and transparency.

“There is no intellectual exchange of any substance whatsoever,” Varoufakis said, likening the Eurogroup to a policy-laundering system used by the European Commission, ECB and International Monetary Fund to give their austerity policies an air of democratic respectability.

Other European officials believe the Eurogroup has grown more disciplined and productive under the leadership of Dijsselbloem than it was under his long-serving predecessor Jean-Claude Juncker, who is now president of the European Commission. In the Juncker era, when he was prime minister and finance minister of Luxembourg, “when you started a meeting, it wasnt clear what the agenda was,” said one official from that period, adding that discussions were very long and “confusing.”

Juncker admitted to a meeting of the federalist European Movement in May 2011 that he viewed it as necessary to lie to the public about certain aspects of eurozone management, and that the Eurogroup was a place for “secret, dark debates.”

Avoiding scrutiny

Dijsselbloem, who declined to be interviewed for this article, may not hold the presidency much longer. His Labor Party was crushed in Marchs Dutch election and he is likely to leave office once a new coalition government is formed. There are few rules on the succession process: By convention, it is run by a finance minister from the currency bloc, but the protocol that governs the group requires only that it elect a president every two-and-a-half years.

Whatever happens next, the Eurogroups future is likely to depend on increasing the levels of trust and transparency. Dijsselbloem has moved in that direction, including issuing annotated agendas and written statements after its meetings.

Dijsselbloem, during a hearing by European Parliament Committee on Economic and Monetary Affairs | Stephanie Lecocq/EPA

Frances new President Emmanuel Macron has floated a much more ambitious reform of the eurozone that envisions a cross-border finance ministry, and France and Germany have a joint proposal in mind. On May 31 the Commission is expected to publish its own “reflection paper” on issues such as a common eurozone budget and whether to mutualize the public debt of individual eurozone countries, according to those involved in drafting the paper.

If any of these ideas prosper, the Eurogroup — which was extended unusual leeway to operate informally and out of sight to help it defend the euro in times of crisis — wont be able to avoid greater scrutiny.

But, as one Commission official argued privately, the consequence of reform could just be that the same influential group finds another format to hold its informal talks. “That wouldnt be good for the overall result,” cautioned the official, who argued that a group as large and diverse as the EU will always need a safe space to talk in private.

In general terms, the European Commission sees the Eurogroup as a problem for national ministers in the Council of the EU to resolve. “Its a Council formation, for better or worse,” said a senior Commission official. “Its for them to decide how they organize themselves.”